OVL mulls buying Petronas stake in Venezuela

NEW DELHI: ONGC Videsh Ltd, the overseas arm of state-owned Oil & Natural Gas Corp (ONGC), and its partners OIL and IOC are mulling buying 11 per cent stake that Malaysia's Petronas has decided to give up in a USD 20 billion oil project in Venezuela.

Petroliam Nasional Bhd, Malaysia's state-run oil company, has decided to withdraw from the Carabobo-I project following dispute over terms with Venezuela's state explorer Petroleos de Venezuela SA (PdVSA).

OVL has 11 per cent stake in the project while Oil India Ltd (OIL) and Indian Oil Corp (IOC) hold 3.5 per cent each. Spain's Repsol SA holds 11 per cent stake in the project while the remaining 60 per cent is with PdVSA.

All the partners in the project, including PdVSA, have right of first refusal or pre-emption rights to the Petronas stake.

"We are examining the option," a source in the Indian consortia said. "A decision will depend on the price as well as the reason why Petronas is exiting the project."

In case, none of the partners pre-emption, the 11 per cent stake may be distributed among the partners proportionately.

The Carabobo-1 project in the Orinoco heavy oil belt began limited production in March this year and is planned to produce 480,000 barrels of oil a day at peak. The field requires USD 20 billion to develop and produce oil.

The consortia, which had in 2010 paid USD 1.05 billion to win the project, is also investing in a separate a 200,000 barrel per day upgrader to convert heavy crude into light crude oil.

Sources said Petronas conveyed to Venezuelan government on August 27 its decision to exit the project.

Under Venezuelan law, the government has to approve the departure and the new ownership structure of the venture.

While OIL is said to be not keen on taking additional stake, OVL will study its financial position before deciding on exercising its pre-emption right, they said.

OVL has in recent weeks struck deals to buy 20 per cent stake in a giant Mozambique gas field for over USD 5 billion, 80 per cent of which is to be financed through debt.

The company has one month to decide on the pre-emption, sources added.

Venezuela's Orinoco belt extends over 55,314 square kilometers and may hold 257 billion barrels of proven heavy oil reserves. PTI ANZ MR 09101652 NNNN